Invest KOREA

Yes, a report of real estate acquisition by a foreigner is required. ◎ Even if a company is a domestic corporation, if half or more of its executives are foreign nationals or half or more of its shares are held by foreign nationals or foreign corporations, the domestic corporation is classified as foreigner, etc. under the Act on Report on Real Estate Transactions, etc. Therefore, the company is subject to report real estate acquisition by foreigners.

A domestic branch of a foreign corporation should report real estate acquisition by foreigners. ◎ Under the Act on Report on Real Estate Transactions, etc., a foreign corporation’s domestic branch is deemed a foreigner, hence reporting of a real estate acquisition is required. ◎ In this case, when introducing funds into Korea from overseas to acquire domestic real estate, the domestic branch is classified as a resident under the Foreign Exchange Transaction Act. In this regard, the branch can introduce the operational funds from its overseas headquarters through a designated foreign exchange bank without reporting the real estate acquisiton under the Foreign Exchange Act (Article 9-34 of the Foreign Exchange Transactions Regulations).

Yes. ◎ Parties to a transaction including a foreigner, etc., entering into a contract to acquire real estate in Korea shall report to the relevant report-receiving authority within 30 days from the transaction contract date. (Article 3(1) of the Act on Report on Real Estate Transactions, etc.) ◎ However, when a foreigner, etc. enters into a contract on acquisition of any real estate under Article 8(1) of the Act on Report on Real Estate Transactions, etc., he/she shall file a report thereon with the report-receiving authority within 60 days from the acquisition date of the real estate. If the real estate acquisition is by means of inheritance, auction, or any cause other than contracts under Article 2 of the Act on Report on Real Estate Transactions or Article 5(2) of the Enforcement Decree of the Act on Report on Real Estate Transactions, the report shall be made to the report-receiving authority within six months. ◎ If a national of the Republic of Korea who possesses any real estate within the territory of the Republic of Korea or a corporation or organization incorporated under the statutes of the Republic of Korea becomes a foreigner, etc., and if the relevant foreigner, etc. intends to possess the relevant real estate, etc. continuously, the foreigner, etc. shall file a report thereon with the report-receiving authority within six months from the date of change to a foreigner, etc. as prescribed by Presidential Decree. ◎ Penalty for failure to report acquisition 1. A person who fails to report the real estate transaction under a contract shall be punished by an administrative fine not exceeding KRW 5 million, and a person who files a false report by an administrative penalty not exceeding five percent of the acquisition value of the relevant real estate, etc. (Article 28(2), 28(3) of the Act on Report on Real Estate Transactions) 2. A person (foreigner, etc.) who fails to file a report under Article 8(1) or files a false report shall be punished by an administrative fine not exceeding KRW 3 million (Article 28(4) of the Act on Report on Real Estate Transactions). 3. A person (foreigner, etc.) who fails to report a real estate acquisition by means of inheritance, auction, or any cause other than contracts or files a false report shall be punished by an administrative fine not exceeding KRW 1 million (Article 28(5) of the Act on Report on Real Estate Transactions). 4. A person (foreigner, etc.) who fails to file a report on continuous possession of land or files a false report shall be punished by an administrative fine not exceeding KRW 1 million (Article 28(5) of the Act on Report on Real Estate Transactions).

Where parties to a transaction, including a foreigner, etc.*, enter into ① a real estate sales contract or ② a contract for supply of real estate under the Housing Site Development Promotion Act or the Housing Act, they are required to notify the relevant authority within 30 days of the date of signing the contract. (Article 3(1) of the Act on Report on Real Estate Transactions, etc. If the real estate acquisition is pursuant to Article 8(1), notification should be filed within 60 days. If the acquisition is pursuant to Article 8(2) of the same Act or Article 5(2) of Enforcement Decree of the Act, notification should be made within six months.) ◎ It is necessary to check in advance whether the land is acquirable only by reporting or is subject to prior permission for transaction. If a foreigner enters into a purchase contract without the transaction permission for the property subject to prior approval, the contract shall be nullified, and imprisonment or a fine sentence may be imposed, making it challenging to acquire the real estate. ◎ Land requiring permission for transaction by foreigners (Article 9 of the Act on Report on Real Estate Transactions, etc.) 1. Military bases and installation protection zones defined in subparagraph 6 of Article 2 of the Protection of Military Bases and Installations Act, and such other areas as may be especially necessary to limit land acquisition by a foreigner, etc. for the purposes of national defense 2. Designated cultural heritage defined in Article 2(2) of the Cultural Heritage Protection Act, and protective facilities or protection zones therefor 3. Ecological and scenery conservation areas set in subparagraph 12 of Article 2 of the Natural Environment Conservation Act 4. Special districts for protection of wildlife under Article 27 of the Wildlife Protection and Management Act ◎ Penalty provision: A foreigner, etc. who enters into any land acquisition contract without obtaining permission or after obtaining permission by illegal means shall be subject to imprisonment with labor for not more than two years or by a fine not exceeding KRW 20 million.

When a foreigner acquires real estate, applicable laws and procedures vary depending on the purpose of acquisition, residency status, and whether the buyer is a corporate or an individual. ◎ The Act on Report on Real Estate Transactions, etc. stipulates only the procedures for a foreigner to acquire real estate in Korea. When the real estate acquisition is for-profit such as property rental, in addition to the registration of real estate acquisition by a foreigner, foreign-invested company registration through foreign investment notification under the Foreign Investment Promotion Act is required. If the investor is a nonresident under the Foreign Exchange Transactions Act, an additional registration should follow for the acquisition of the real estate. ◎ When a foreign company sets up a branch in Korea, branch establishment notification under the Foreign Exchange Transactions Act is required instead of foreign investment notification under the Foreign Investment Promotion Act. After registration of a branch, purchase the real estate under the name of the branch.

It is possible to change the management institution for foreign investment and this is referred to change of delegated authority. You can submit the application form for change in delegated authority to the original institution by using attached Form 2: Application for change in delegated authority of the standards for handling business affairs related to foreign investment (Downloadable at www.investkorea.org/kr/published/presentation.do).

When registering a company’s incorporation, a certificate of deposit for payment for stock subscription should be submitted to the court. However, if the capital is less than KRW 1 billion, a balance certificate may be submitted instead ◎ Once the foreign investment is notified, a temporary account should be opened at a designated foreign exchange bank under the foreign investor's name. The temporary account serves to deposit foreigncurrency investment funds for stock subscription payment, and the designated bank can issue a certificate of payment for stock subscription. ◎ A balance certificate can be submitted for a stock company whose initial capital is less than KRW 1 billion. The investment fund should be deposited into a foreign currency account under the investor's name, and the bank can issue the balance certificate. The balance certificate is deemed to have the same effect as the certificate of deposit for payment for stock subscription to be submitted to the court registry office

There is a regulation that allows a foreign-invested company to receive remittance from the parent company for incorporation costs and repay the amount upon the corporation's registration, which is separate from the foreign investment fund. According to subparagraph 6 of Article 4-3 of the Foreign Exchange Transactions Regulations, it is permitted to make the payment to return the expenses borne by non-residents to incorporate a foreign-invested company under the Foreign Investment Promotion Act. ◎ Once the company is registered, expenses spent prior to the incorporation should be recorded in the book as business startup costs. The amount received from the parent company can be transferred back via wire transfer. In this case, the parent company should have recorded the remittance to the subsidiary or branch for its establishment as a receivable. For accounting purpose after incorporation, the initial expenditure received from the parent company should be spent under the name of the representative of the established corporation, and the supporting documents should be prepared.

The cost of incorporation includes the capital registration tax, local education tax, and fees for application for registration. ※Legal fees are not included. ◎ Seoul Metropolitan Overconcentration Control Region – Seoul, Incheon, Uijeongbu-si, Guri-si, Namyangju-si, Hanam-si, Goyangsi, Suwon-si, Seongnam-si, Anyang-si, Bucheon-si, Gwangmyeong-si, Gwacheon-si, Uiwang-si, and Gunpo-si – Enforcement Decree of the Seoul Metropolitan Area Readjustment and Planning Act [attached Table 1]

According to Article 28(2) of the Local Tax Act, the heavy taxation rate shall not apply to the types of business specified as those for which it is unavoidable to establish business facilities in a large city, and an amount equal to 0.4 percent of the paid-in capital shall be paid as license registration tax. Around 30 business types are subject to this exception, which are listed in Article 26 (Exception from Heavy Taxation on Corporations in Large Cities) of the Enforcement Decree of the Local Tax Act.